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This paper studies the period in Canada when both private bank notes and government-issued notes (Dominion notes) were simultaneously in circulation. Because both of these notes shared many of the characteristics of today's digital currencies, the experience with these notes can be used to draw lessons about how digital currencies might perform.

The objective of this article is to improve our understanding of counterfeiting and its policy implications by reviewing research in this area. There has been almost no empirical work on counterfeiting because of the limited availability of counterfeiting data and related statistics. The authors therefore focus on theoretical studies that directly model the behaviour of the relevant economic agents. They first establish some stylized facts about counterfeiting to provide a general understanding of the problem. They then briefly review several models of counterfeiting and summarize their relevant insights, focusing on the implications of the findings for the incentive to counterfeit, social welfare and anti-counterfeiting policies. The authors find that the policy implications of these studies support the Bank’s comprehensive anti-counterfeiting strategy.

The author investigates the influence of bank capital on economic activity, using a macroeconomic model that incorporates an explicit role for financial intermediation. The analysis focuses on the role of a “bank-capital channel” in propagating and amplifying monetary policy actions and other shocks. The question of whether weaker bank balance sheets make the economy more vulnerable to adverse shocks is examined, together with the impact of initiatives, such as countercyclical capital buffers, on the transmission of monetary policy and other shocks to the real economy.

This note examines the costs of the Government of Canada bond buyback and switch programs between 1998 and 2016. Our analysis indicates that the auction design of the buyback program was effective in retiring government debt with minimal costs resulting from bid shading in auctions and price impact.

Cover page

African Marriage Money

The metal marriage currencies pictured on the cover are part of the National Currency Collection, Bank of Canada.
Photography by Gord Carter, Ottawa.

This article reviews arguments in the literature for and against price-level targeting, focusing on its costs and benefits compared with inflation targeting. Benefits of price-level targeting include the effect on forward-looking inflation expectations; the ability to substitute for commitment by a central bank to its future policies; lessening forecast errors; better economic performance in response to real shocks because of lower wage indexation; and a reduction in the problem of the zero lower bound on nominal interest rates.

Governor Tiff Macklem talks about the need for the Bank to be clear, relatable and understandable when it communicates with the public.

We quantitively assess the risks of a wage-price spiral occurring in Canada over history. We find the risk of a wage-price spiral increases when the inflation expectations become unanchored and the credibility of central banks declines.

Standard new trade models depict producers as heterogeneous in total factor productivity. In this paper, I adapt the Eaton and Kortum (2002) model of international trade to incorporate tradable intermediate goods and producer heterogeneity in value-added productivity.